Lynas plans magnet venture with Siemens

Rare earths miner
Lynas Corporation
says its plans to build a factory to make high-performance magnets in joint venture with German engineering giant Siemens, that will use minerals supplied by Lynas.

Lynas and Siemens Drive Technologies division inked a letter of intent to make the magnets at a factory in Malaysia for use in Siemens’ energy-efficient vehicle drive applications and wind-turbine generators. Commercial details of the transaction are still being worked out and the companies said they would not be disclosed.

Lynas chief executive Nick Curtis told The Australian Financial Review that high technology companies would not invest in rare earth-consuming businesses without the security of supply that a miner could give.

“There are technologies out there, such as the large wind turbines, the direct drive turbines that need certainty of supply in order to be rolled out," he said. “They’re the best available technology but the disruption in the supply chain in rare earths has caused people to rethink the safety of the supply chain."

He said the investment was not a case of margins being better in downstream use of the minerals than in their primary production: “This is about us ensuring there is growth in the industry."

Nor was he concerned that moving into end-use of the minerals would leave Lynas investors confused: “We see our long term sustainable competitive advantage as being structurally integrated into the supply chain and satisfying the absolute needs of the users of rare earths so as to encourage them that there’s stability and certainty in the availability of these materials and they can develop major new applications safely."

The supply of rare earths has been a sensitive subject. China currently dominates global rare earths production, and has imposed stringent controls and quotas for their export to ensure supply to its own industries. The World Trade Organisation this week said controls on other mineral exports breached global trade laws, leading experts to suggest that action in the rare earths sector might come next.

Lynas will hold a 45 per cent stake in the joint venture company and fully fund its share of the development costs, Mr Curtis said without disclosing details of what these might total.

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While output from the Mount Weld rare earths deposit in Western Australia is currently about 70 per cent committed, Mr Curtis said the magnet plant was far-dated and would generate increased consumption.

“This is somewhat beyond that and it’s not about starting next year with high volume. It’s about investing with Siemens for a long-term joint venture that will generate significant development in the use of rare earths," he said.

Lynas shares have recovered ground in recent days after being smashed on Friday last week, when Malaysia’s government indicated it would impose stricter conditions on Lynas’s development of its processing plant following a report from the International Atomic Energy Association. “The recently completed IAEA review has confirmed that the Lynas plant in Malaysia, once completed later this year, is expected to be fully compliant with international standards," the company said in a statement.

Siemens’ drive technologies division currently generates revenues of around 7 billion euros a year and is not involved in similar joint ventures elsewhere in the world.